By: DailyForex.com
The EUR/GBP pair initially rose during the session on Monday, but as you can see, it fell later in the day. The resulting candle was a shooting star, and although this is a very negative sign I am not willing to short this market. For those of you that have been watching this pair, you know that the 0.84 handle is significant support. In fact, I believe the support goes all the way down to the 0.83 handle, and as a result a breakdown is going to be very difficult to obtain at this point.
Nonetheless, this pair has been selling off drastically over time, and I do believe that momentum is building for a move lower. The resistance above is at the 0.85 handle, and that's essentially the problem that I have with this market right now. We simply are in far too tight of a range at the moment in order to do anything beyond scalping this particular pair. A 100 pip range is not enough to do anything on the longer-term charts.
A battle between two weak currencies.
The biggest problems are going to have in this particular currency pair is that it is a fight between two currencies that are presently very weak. Because of this, I feel you actually have to watch both of these currencies against the US dollar to gauge which one is going to prevail in the end. I believe that the British pound will probably do a bit better than the Euro, but this is relatively speaking of course.
There has been a bit of a rally in the British pound solely based upon the idea that the United Kingdom did not enter a so-called "triple dip recession", but quite frankly even with that good news the economy in that kingdom looks very weak. The European Union is an absolute disaster at this point, as there is almost no growth to be found. Because of this, I think you can count on continued choppiness, and quite frankly I think the best plan this market is the short it 0.85, and buy it 0.84. This is one of those times when you can be quite lazy in your thinking, simply buying and selling until we break out. In other words, "it will work until it doesn't."